Users 'will not pay for high 3G costs'

Mobile phone customers will not bear the brunt of the hefty prices paid for next-generation mobile phone licences, leading industry players have claimed.

According to speakers at the Universal Mobile Telecommunications System (UMTS) 2000 congress in Barcelona this week, the high fees generated for securing a third-generation (3G) licence should not affect the prices customers will have to pay for the new services.

The UK spectrum auction, held in April this year, raised over £22bn, with some operators paying over £5bn to secure a licence. Many analysts and investors voiced concerns that the mobile operators will be forced to set the consumer prices for 3G services at much higher levels.

Last month, German licence winner T-Motion, the mobile services arm of Deutsche Telekom, said that 3G pricing is likely to be double that of normal telephone costs. The company said it will need to "double income per capita simply to pay for the licence and the construction of the network".

The concern is that as well as the cost of securing a licence, operators may have to spend a further £5bn on rolling out the new network coverage. But delegates at UMTS 2000 said that while new services will certainly cost more, this will be down to the quality of the services and not the licence cost.

"The bills for 3G licences are high and everyday is a massive debt load for operators," said Adrian Nemcek, senior vice president of the global telecoms solutions sector at Motorola. "Clearly there is a requirement for operators to see a return on their investment, but no customers will be made to pay for these high prices."

According to Nemcek, while customers will be prepared to pay more for the types of services that will be available once 3G is rolled out, licence holders will be able to make up the cost through other revenues including advertising and financing.

"The types of services and applications that 3G technology allow will enable operators to increase their revenue through other streams," he said. "Location based services will enable operators to capitalise on where the customer is. We will see companies paying to have localised information and advertising sent directly to the customer."

Mobile phone manufacturer Nokia, which unveiled a range of 3G services for operators and service providers at the conference yesterday, also believes that 3G operators can increase their revenue through localised advertising and content deals.

The types of services being touted at UMTS 2000, which customers can expect to see once 3G networks are rolled out, include location based services, unified messaging, and information based services and entertainment, such as being able to download MP3 music files.

Eventually, services such as video on demand, videoconferencing and web browsing are expected to emerge.